Invoking National Security to Restrict Imports

U.S. President Donald Trump on Thursday will sign a directive asking for a speedy probe into whether imports of foreign-made steel are hurting U.S. national security, two administration officials said on Wednesday.

Trump is to sign the memorandum related to section 232 of the Trade Expansion Act of 1962 at a White House event that is expected to include leaders of some U.S. steel companies. The law allows the president to impose restrictions on imports for reasons of national security.

Section 232 of the Trade Expansion Act of 1962

Section 232 authorizes the Secretary of Commerce to investigate whether imports pose a threat to "national security." In Section 232 investigations, the Bureau of Industry and Security (BIS) within DOC investigates the effects of certain imports on US national security. DOC is required to initiate an investigation to determine the effects on the "national security of imports" (i) upon the request of the head of any department or agency; (ii) upon application of an interested party; or (iii) on the Secretary's own motion (typically, these investigations are initiated at the request of a specific industry). The Secretary issues a report, based on which the President is authorized to negotiate agreements to limit or restrict imports, or to "take such actions as the president deems necessary to adjust the imports of such article so that such imports will not threaten or impair the national security." The statute places no limit on the nature of the restrictions or the height of tariffs.

The key requirement for action under Section 232 is a threat or impairment of "national security," which is not defined in the law or in its implementing regulations. BIS in the most recent (2001) Section 232 investigation found, based on the statutory language and congressional intent, that the standard would be met where imports of the product at issue threaten to impair US national security either: (i) "by fostering US dependence on unreliable or unsafe imports"; or (ii) "by fundamentally threatening the ability of US domestic industries to satisfy national security needs."

Historically, Section 232 has been invoked to limit imports of specific items. There have been only two Section 232 investigations since the United States joined the WTO in 1995 – on crude oil in 1999 and iron and steel in 2001 – and in both cases BIS declined to recommend that the President take action under Section 232.[15] However, Section 232 measures were imposed several decades ago. President Nixon imposed an across-the-board 10 percent surcharge program in 1971 pursuant to Section 232(b). In addition, by presidential proclamation in 1975, President Ford found that it was "necessary and consistent with the national security to discourage importation into the United States of petroleum, petroleum products, and related product...", and invoking Section 232(b), issued a proclamation to raise licensing fees on petroleum products.[16] The proclamation also imposed on all imported oil a supplemental $1 per barrel fee for oil entering the US after March 1, 1975, and a $3 fee for oil entering the US after April 1, 1975. However, following the imposition of these fees, on April 10, 1975, Congress passed the Emergency Petroleum Allocation Act of 1973 to prohibit the President from using Section 232(b) of the Trade Expansion Act of 1962 or any other provision of law to establish minimum prices for crude oil without congressional authority.

President Trump could instruct his administration to investigate the national security implications of specific imports (such as Chinese steel imports) under Section 232, but doing so would face significant legal and practical constraints. First, legal challenges to these unilateral actions are likely because such measures could contradict both past BIS practice and the original intent of the statute – indeed, it is difficult to imagine how BIS' current standard would be met today in the case of almost all globally-traded commodities. However, courts could decline to intervene given that this provision aims to safeguard national security interests, an area where courts have shown great deference to the executive branch.[17]

Second, the foreign target countries of a Section 232 action also would have recourse to bring a complaint to the WTO. In response, the US could cite to the little-used GATT Article XXI Security Exceptions, which permit a member country to depart from GATT obligations in "time[s] of war or other emergency in international relations."[18] However, the United States' use of Article XXI would be highly controversial and could encourage other WTO Members to rely thereupon, thus breeding tit-for-tat protectionism under the guise of "national security" and undermining the efficacy of WTO dispute settlement. These concerns have historically acted as a check on WTO Members' invocation of Article XXI.

Third, President Trump's use of Section 232 could have severe economic repercussions. A target country would likely retaliate with equivalent measures on US goods, similar to when China initiated retaliatory AD investigations of imports of US cars and poultry in response to President Obama's imposition of new duties on imports of Chinese tries under Section 421 of the Trade Act of 1974. This risk may be even more serious for President Trump with respect to China, for example, as the country's AD enforcement agency has become more sophisticated and experienced in bringing an increasing number of trade cases against foreign products in recent years. The emergence of such actions would not only hurt US exporters and consumers, but also likely rattle financial markets that currently expect President Trump to pursue a far less aggressive US trade policy.

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U.S. President Donald Trump on Thursday will sign a directive asking for a speedy probe into whether imports of foreign-made steel are hurting U.S. national security, two administration officials said on Wednesday.

Trump is to sign the memorandum related to section 232 of the Trade Expansion Act of 1962 at a White House event that is expected to include leaders of some U.S. steel companies. The law allows the president to impose restrictions on imports for reasons of national security.

Section 232 of the Trade Expansion Act of 1962

Section 232 authorizes the Secretary of Commerce to investigate whether imports pose a threat to "national security." In Section 232 investigations, the Bureau of Industry and Security (BIS) within DOC investigates the effects of certain imports on US national security. DOC is required to initiate an investigation to determine the effects on the "national security of imports" (i) upon the request of the head of any department or agency; (ii) upon application of an interested party; or (iii) on the Secretary's own motion (typically, these investigations are initiated at the request of a specific industry). The Secretary issues a report, based on which the President is authorized to negotiate agreements to limit or restrict imports, or to "take such actions as the president deems necessary to adjust the imports of such article so that such imports will not threaten or impair the national security." The statute places no limit on the nature of the restrictions or the height of tariffs.

The key requirement for action under Section 232 is a threat or impairment of "national security," which is not defined in the law or in its implementing regulations. BIS in the most recent (2001) Section 232 investigation found, based on the statutory language and congressional intent, that the standard would be met where imports of the product at issue threaten to impair US national security either: (i) "by fostering US dependence on unreliable or unsafe imports"; or (ii) "by fundamentally threatening the ability of US domestic industries to satisfy national security needs."

Historically, Section 232 has been invoked to limit imports of specific items. There have been only two Section 232 investigations since the United States joined the WTO in 1995 – on crude oil in 1999 and iron and steel in 2001 – and in both cases BIS declined to recommend that the President take action under Section 232.[15] However, Section 232 measures were imposed several decades ago. President Nixon imposed an across-the-board 10 percent surcharge program in 1971 pursuant to Section 232(b). In addition, by presidential proclamation in 1975, President Ford found that it was "necessary and consistent with the national security to discourage importation into the United States of petroleum, petroleum products, and related product...", and invoking Section 232(b), issued a proclamation to raise licensing fees on petroleum products.[16] The proclamation also imposed on all imported oil a supplemental $1 per barrel fee for oil entering the US after March 1, 1975, and a $3 fee for oil entering the US after April 1, 1975. However, following the imposition of these fees, on April 10, 1975, Congress passed the Emergency Petroleum Allocation Act of 1973 to prohibit the President from using Section 232(b) of the Trade Expansion Act of 1962 or any other provision of law to establish minimum prices for crude oil without congressional authority.

President Trump could instruct his administration to investigate the national security implications of specific imports (such as Chinese steel imports) under Section 232, but doing so would face significant legal and practical constraints. First, legal challenges to these unilateral actions are likely because such measures could contradict both past BIS practice and the original intent of the statute – indeed, it is difficult to imagine how BIS' current standard would be met today in the case of almost all globally-traded commodities. However, courts could decline to intervene given that this provision aims to safeguard national security interests, an area where courts have shown great deference to the executive branch.[17]

Second, the foreign target countries of a Section 232 action also would have recourse to bring a complaint to the WTO. In response, the US could cite to the little-used GATT Article XXI Security Exceptions, which permit a member country to depart from GATT obligations in "time[s] of war or other emergency in international relations."[18] However, the United States' use of Article XXI would be highly controversial and could encourage other WTO Members to rely thereupon, thus breeding tit-for-tat protectionism under the guise of "national security" and undermining the efficacy of WTO dispute settlement. These concerns have historically acted as a check on WTO Members' invocation of Article XXI.

Third, President Trump's use of Section 232 could have severe economic repercussions. A target country would likely retaliate with equivalent measures on US goods, similar to when China initiated retaliatory AD investigations of imports of US cars and poultry in response to President Obama's imposition of new duties on imports of Chinese tries under Section 421 of the Trade Act of 1974. This risk may be even more serious for President Trump with respect to China, for example, as the country's AD enforcement agency has become more sophisticated and experienced in bringing an increasing number of trade cases against foreign products in recent years. The emergence of such actions would not only hurt US exporters and consumers, but also likely rattle financial markets that currently expect President Trump to pursue a far less aggressive US trade policy.